IT is key for Brazil to compete with China for European markets

Brazil will not compete with India and China on cheap labour in global export markets, but will instead look to advanced IT products and services to gain an advantage, according to a number of influential executives that were speaking in Sao Paulo last week.

Derek du Preez
May 15, 2012

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Brazil will not compete with India and China on cheap labour in global export markets, but will instead look to advanced IT products and services to gain an advantage, according to a number of influential executives that were speaking in Sao Paulo this week.

Antonio Gil, president of Brazil's ICT Associtation, said that mimicking India and China's model does not make sense for Brazil's economy.

“In the beginning we tried to copy India, but we can't do this today. We will not compete with them on cheap labour. Brazil is more expensive,” said Gil.

“So, what should we do? We need to look into niche markets at the highest level. For instance, banking and financial applications.”

He added: “Brazilian banks are years ahead of most financial institutions in the world in their use of IT. This is an area where Brazil could play a role in the export markets.”

Gil said that this was also true of Brazil's energy and agriculture sector. He said: “Brazil is in the top two or three markets in the world, including US and Europe, for IT in these sectors.”

According to the latest IDC statistics, Brazil is the fifth largest market for ICT in the world, valued at approximately $198 billion (£123 billion). It has 1.2 million professionals working in the IT industry.

SAP's president of Brazil, Luis Cesar Verdi, expressed a similar viewpoint to Gil and stated that Brazil was “no longer a source of cheap labour”.

“With cheap labour you can do many things. You can export cheap products without needing a level of operational excellence, because you already have low production costs. This is not the case in Brazil,” explained Verdi.

“The appreciation of the local currency against the Euro over time, and the maturity of the Brazilian market, means that we are no longer a source of cheap labour.”

Verdi said that Brazilian companies now needed to compete on the quality of their products and services, which he believes can be achieved by using IT to improve operations and supply chains.

“Look at agriculture. The companies in this sector are producing for the domestic market, but they are also exporting,” he said.

“They need to be excellent in both quality and cost. Not just quality and cost of the final product, but of the whole supply chain, of producing, transporting, and everything else,” he added.

“Their internal operations need to be very competitive and efficient because they are competing with other regions to conquer the European market.”

Dr Gustavo Loyola, economist and former president of Brazil's central bank, reaffirmed this point and said that competitiveness in global markets was going to be driven by effective use of IT.

“Brazil isn't as competitive as it could be and our domestic prices are very high in some prices compared to other foreign countries. We are expensive in both tradeable goods and the services sector,” explained Loyola.

“Of course IT is the answer to all of this. The services sector in Brazil needs to increase its investment in IT to reduce its costs. Competitive pressure is driving the Brazilian compass to invest more and more in IT.”